Online trade
Chinese cheap marketplace Temu between hype and criticism
With its cheap offers, the online marketplace Temu from China is growing rapidly in Germany. photo
© Hannes P. Albert/dpa
With its cheap offers, the online marketplace from China is riding a wave of success in Germany. No other app is currently downloaded more often. But criticism of the business model is growing.
A wedding dress for 28.48 euros, five pairs of socks for 1.97 euros or a neck fan to wear around your neck for 6.98 euros: the Chinese online marketplace provides mini prices, discount offers of up to 90 percent and some rather bizarre products Temu is currently causing a stir in German online retail. According to the Appfigures website, the Temu app was the most downloaded free app on Google Play and the Apple Store in Germany in mid-August.
Temu is not without controversy. The consumer advice center in North Rhine-Westphalia recently warned that the low prices “often go hand in hand with poor product quality and safety”. In addition, buyers would have to reckon with the fact that customs duties and import sales tax could be incurred, which would increase the final price. During test purchases, the West German Broadcasting Company found some dangerous defects in technical equipment. At the request of the German Press Agency, Temu initially did not comment on the allegations.
No control
In fact, Temu probably doesn’t feel responsible for it. The company itself does not act as a seller, but only makes its marketplace available to retailers as a platform. The Temu Terms of Service specifically states that “We have no control over and do not guarantee the existence, quality, safety, suitability or legality of the products”. The marketplace also does not feel responsible for the truthfulness, accuracy or legality of the information contained in the product listings.
But Temu is anything but a little slob. Behind Temu is the Shanghai-based company PDD Holdings. It is known in China for the popular app Pinduoduo, one of the country’s fastest-growing e-commerce platforms. Similar to Temu, Pinduoduo uses heavy discounts to lure customers. According to its own information, the platform has more than 900 million users in the People’s Republic.
However, there has always been criticism of the offer. For example, Pinduoduo hit the headlines years ago because users accused the company of offering inferior or even counterfeit goods. The company also came under pressure because of the allegedly very high workload at Pinduoduo.
Rapid growth
Since last year, PDD has been pushing ahead with expansion abroad. Temu launched in the US in September 2022 and quickly became the most downloaded app there. But the Chinese company quickly became the focus of US politics.
A report by a congressional committee recently accused both Temu and the Chinese app Shein of offering products that were manufactured using forced labor in the western Chinese region of Xinjiang. There is an “extremely high risk” that forced labor could contaminate supply chains, the report warned.
As far as Temu’s future prospects in Germany are concerned, industry observers are divided. The software entrepreneur and industry expert Alexander Graf recently said: “Temu is not a flash in the pan.” The company offers real innovations in supply chain, goods management and logistics.
Kai Hudetz from the Cologne Institute for Retail Research (IFH) is much more skeptical. “There is much to suggest that platforms like Wish or Temu will ultimately remain niche providers despite the recent hype,” he told the German Press Agency.
Buy without a plan
“Temu lures with low prices, sweepstakes, huge discounts and an artificial shortage of supply. The platform wants to inspire spontaneous purchases that you hadn’t planned at all,” Hudetz describes the business model. For a certain target group, such a gamification of purchasing is of course exciting. But there is little to suggest that the strategy will be successful in the long term.
“People in this country are not usually looking for the very lowest price, but for a reasonable price-performance ratio,” said Hudetz. They are also spoiled when it comes to delivery speed and returns processing. Temu and Co. face considerable challenges here.
“Most consumers already think about returns when ordering – and there are considerable reservations about Asian marketplaces in this area, especially since customs duties can often be added,” said Hudetz. And in terms of delivery speed, Temu and Co. could not keep up with established providers such as Amazon or Otto anyway. In addition, people’s growing awareness of sustainability speaks against the long-term success of such models.
The e-commerce expert Gerrit Heinemann from the Niederrhein University of Applied Sciences has a similar opinion. Temu is “ultra fast fashion with a turbocharger,” says the industry insider. However, the development in the USA shows that with such providers, ultra-fast often also applies to the lifespan of the business model. “Because their half-life is obviously also ultra-short.”